Texas Court Ruling Bolsters Homeowner Rights in Insurance Disputes

DALLAS, TX – January 07, 2026 – A recent decision by a Texas appellate court has delivered a significant victory for homeowners, affirming that insurance companies cannot use policy deductibles to automatically erase a jury verdict and evade paying the policyholder's legal fees. The ruling provides crucial clarity in the often-contentious landscape of insurance claims and strengthens the ability of individuals to challenge coverage denials.

In a detailed opinion, the Fifth Court of Appeals at Dallas upheld a trial court judgment in favor of homeowners Meagan Novak and Adam Wright against the Texas FAIR Plan Association (TFPA). The insurer had denied their claim for sudden and accidental water damage, leading to a lawsuit. A Dallas County jury sided with the homeowners, awarding them $1,126 in actual damages and, critically, $60,000 in attorneys’ fees. The appellate court’s decision solidifies this outcome, setting a precedent that could reshape how similar disputes are handled across the state.

The Deductible Defense

The central issue on appeal was a common tactic used by insurers in post-verdict challenges. The Texas FAIR Plan Association argued that because the jury's damage award of $1,126 was less than the homeowners' policy deductible, it effectively owed nothing on the claim itself. Therefore, the insurer contended, the homeowners were not the “prevailing party” and should not be entitled to recover their substantial attorneys’ fees. Had this argument succeeded, it would have nullified the financial consequences for the insurer despite a jury finding in favor of the policyholders.

The trial court rejected this logic, and the Fifth Court of Appeals has now affirmed that rejection in full. The appellate panel held that a jury can reasonably account for a policy deductible when it calculates damages. This means the jury's award, even if below the deductible amount, does not invalidate the finding that the insurer was in the wrong. The decision confirms that homeowners who win their case at trial are entitled to recover their legal costs, a vital component for ensuring access to justice.

“The court made clear that insurers cannot erase jury verdicts by relying on deductibles after the fact,” said Chad Baruch, the managing shareholder at Johnston Tobey Baruch who argued the successful appeal. “This opinion gives trial courts and policyholders clear guidance on how to interpret the court’s charge in this situation.”

An Insurer of Last Resort

The case shines a light on the role of the Texas FAIR Plan Association. Established by the Texas Legislature, TFPA is not a standard insurance company; it functions as an “insurer of last resort.” It provides essential residential property coverage to eligible Texans who cannot secure insurance through the voluntary market, often because they have been denied by at least two private insurers. While it serves a critical function, its position means it often deals with higher-risk properties and complex claims, making disputes an inherent part of its operational landscape.

Policyholders who disagree with a claim evaluation from TFPA can appeal the decision internally. However, as the Novak and Wright case demonstrates, when those discussions fail, litigation becomes the only remaining path. For many homeowners, the prospect of a costly legal battle over a relatively small damage amount is a powerful deterrent. The ability to recover attorneys' fees is often the only factor that makes such a fight financially viable.

This ruling prevents the deductible from being used as a shield against that liability, ensuring that even when the physical damage award is modest, an insurer can still be held accountable for the significant legal expenses a homeowner incurs to prove their claim was wrongly denied.

A Complex Legal Landscape

The Dallas court's decision provides a crucial counterpoint in the ongoing legal debate over attorneys' fees in Texas insurance cases. It stands in interesting contrast to a 2024 Texas Supreme Court ruling in Rodriguez v. Safeco Insurance Company. In that case, which involved a claim under Chapter 542A of the Texas Insurance Code related to forces of nature, the high court found that an insurer could avoid paying attorneys' fees if it promptly paid the full amount determined through an appraisal process, plus statutory interest.

While the Rodriguez decision was seen as a win for insurers by capping fee exposure in specific appraisal scenarios, the Novak v. TFPA ruling addresses a different, but equally important, situation: a full jury trial where the insurer's denial of coverage was challenged and found wanting. The appellate court's affirmation that a jury verdict in favor of the policyholder makes them a prevailing party - regardless of the deductible - carves out essential protection for consumers who must go to court to enforce their rights.

This legal nuance underscores a dynamic tug-of-war between policyholder advocates and the insurance industry. While insurers seek legislative and judicial ways to limit litigation expenses, consumer protection groups and firms like Johnston Tobey Baruch, known for its track record in insurance bad faith litigation, continue to push for rulings that ensure accountability. This latest decision from the Fifth Court of Appeals tips the scales slightly back toward the policyholder, reinforcing the principle that a victory in court should come with the means to have made the fight possible.